An empirical analysis of nonstationarity in a panel of interest rates with factors

Hyungsik Roger Moon, Benoit Perron

Research output: Contribution to journalArticle

23 Citations (Scopus)

Abstract

This paper studies nonstationarities in a panel of Canadian and US interest rates of different maturities and risk. We focus on methods which model the cross-sectional dependence within the panel as a linear dynamic factor model, and decompose our data into common and idiosyncratic components that we analyze in turn. Our results suggest the presence of a single nonstationary factor in our panel. Since some of the idiosyncratic components are stationary, we conclude that these series are cointegrated. Finally, the dominant factors can be interpreted as level and slope factors as in the term structure literature.

Original languageEnglish
Pages (from-to)383-400
Number of pages18
JournalJournal of Applied Econometrics
Volume22
Issue number2
DOIs
Publication statusPublished - 2007 Mar

All Science Journal Classification (ASJC) codes

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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